The global economy’s recent resilience may be a house of cards, built on the unstable foundation of an AI stock boom and a pre-tariff consumer binge, a new report has warned. While this has propped up 2025 growth to 3.2%, the institution fears the structure is fragile and describes the long-term outlook as “dim.”
One side of this unstable foundation is the consumer spending spree that was “brought forward” to beat the introduction of tariffs. The report identifies this as a “trade-related distortion,” a one-off event that created an illusion of strength but is not a basis for sustainable growth.
The other, perhaps even more wobbly, side of the foundation is the financial market boom. The report describes stock valuations as “stretched,” particularly those related to the AI hype. It cautions that a “correction” could cause this part of the structure to collapse, triggering a “sharp” fall in the investment that has been holding everything up.
This fragile construction is why the report remains pessimistic despite the positive headline number. It sees the delayed impact of the tariffs as the inevitable gust of wind that could bring the whole house of cards down.
For countries like the UK, which is trying to build its own recovery while dealing with G7-leading inflation, the instability of the global economic foundation is a major concern. The report is a clear signal that the world needs to move from short-term fixes to building a more solid and sustainable basis for growth.